It will be the most expensive Olympics in history costing an estimated $51 billion. By way of comparison, the 2012 Summer Olympics in London cost just $15 billion. The price tag is even more jaw dropping when one considers that the Winter Olympics, which typically has just a third of the events of the Summer Olympics, is usually far less expensive to put on than the Summer Olympics.

Earlier this month, Business Week published a scathing article on Russia’s spending on the 2014 Winter Olympics entitled The Waste and Corruption of Vladimir Putin’s 2014 Winter Olympics. It’s an interesting article on public construction in the former U.S.S.R., particularly given the massive scope of development which accompanies Olympic construction, which includes not only the construction of specialized facilities for the various events but housing, commercial and infrastructure development as well.

Hosting the Olympics has been a personal dream of President Vladimir Putin. Back in 2007, when Russia was bidding to host the Olympics, Russia blew away the bids of other finalists by pledging to spend $12 billion on the world-wide event. Just to show how serious he was, President Putin had a seven story tall Russian Antonov An-124, one of the largest heavy transport airplanes in the world, bring 200 metric tons of ice and all of the equipment necessary to build an ice rink in tropical Guatemala City across from the hotel where the International Olympic Committee was staying.

Although host nations routinely outspend the amount pledged in their bids, how do you account for a nearly five-fold increase in spending from $12 billion to $51 billion? According to the Business Week article, it’s “a story of ambition, hubris, and greed leading to fabulous extravagance on the shores of the Black Sea.”

Difficult Location – Sochi, once a destination for Joseph Stalin’s workers to recuperate (as opposed to its better known half-sibling Siberia where those needing “re”education were sent), sits on a narrow sliver of land between the Caucasus Mountains and the Black Sea with limited developable land and little infrastructure. $8.7 billion alone, was spent on a road and railway. Interesting as well, for a Winter Olympics venue, Sochi is also one of the few areas in Russia with a sub-tropical climate, with average temperatures between 52 ºF and 65.1 ºF, although during the winter months it averages between 37 ºF and 50 ºF. How this will affect snow conditions during the Olympics is unknown. It may be like skiing on Slurpees. But Russia has promised snow, whether natural, man made, or otherwise, no matter what the cost.

Poor Planning – Although Russia is now trying to downplay the cost of the 2014 Winter Olympics, when it won its bid, the wide-spread view of Russian organizers was that if they “throw money at it, it’ll get built.” But planners ran into a number of problems both known and unknown, including underground streams which have caused recurring flooding, and a devastating storm in 2009 which damaged a newly constructed cargo port, all of which has led to increased labor, material and transportation costs. There have also been anecdotal reports of roads being built, demolished, rebuilt, demolished, and rebuilt again for no apparent reason and claims of widespread displacement of residents and environmental problems.

Corruption – In a political system that less than a generation ago was communist, where everybody technically worked for everybody else, there’s going to be inefficiency. And inefficiency breeds corruption. There’s even a word for it in Russian, “blat.” According to the article, there have been reports of construction companies artificially inflating bids to make up for kickbacks they would have to pay to government officials. One contractor said that he was told by government officials that the contract being awarded to his company was worth 250 million rubles ($7.7 million) “on paper,” but that his company would actually only receive 170 million rubles, the rest presumably being pocketed by the officials.

And, who’s paying for all this? Well, the Russian government of course. And, private investors. Private investors helping to fund Russia’s Olympic construction are motivated less by the pursuit profit, says the article, than a tacit understanding that under Putin they have certain obligations to the Kremlin. According to one former government official, “They got a call saying, ‘There exists the opinion that you should build this or that [project].’” Representatives of one such company, that is renovating the local airport and building the Olympic Village, say that they don’t remember how it was they decided to invest in Sochi.

Well, I suppose that’s one way to do a public-private partnership. Putin style.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

- hide

Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.